I Want You to Want Me

A bank of seven video monitors at the Hard Rock Café's Times Square location conveys the brand's global reach. The monitors, which greet visitors as they enter the downstairs lobby, show what's happening in Hard Rock restaurants around the world, in geographies as diverse as Beijing, London, and Rome. Most are staid, birds-eye-view shots of people dining or shopping, though there's a sudden flurry of activity in Cairo when the wait staff launches into what seems to be an impromptu Y.M.C.A. dance.

While it's not particularly unusual for companies with global reach to show cross-country brand unity in this manner, until last year that unity was largely superficial for Hard Rock Café customers. The issue was this: Its global loyalty program was actually a series of disconnected programs with the same name.

The brand has 177 venues in 58 countries, including 141 restaurants, 19 hotels, and eight casinos. About 60% of the restaurants are franchised and the remaining 40% are corporate owned. In the United States and most of Western Europe, Hard Rock corporate oversees the chain. But in emerging markets, Hard Rock Café restaurants are run via licensed agreements by local business partners, who have a better grasp of the cultural and economic nuances of the region.

Over time this led to inconsistencies among the franchises, many of which ran their own loyalty programs. Benefits accrued by customers worked at some locations, but not others. “Imagine you're in Germany,” says John Galloway, Hard Rock Café's CMO and VP of marketing. “You go to Munich, join the program, but then you go to Hamburg and the program isn't accepted there.”

He's referring to All Access, Hard Rock Café's previous loyalty program, which accrued 715,869 members in a decade. On paper, it sounded like a sweet deal: first available and preferred seating and discounts on food and merchandise, bonus balances for every $200 spent, and occasional email updates.

“Unfortunately, the program didn't work globally,” Galloway says. “For some franchises, their IT systems weren't able to support it.”

In January Hard Rock Café's parent company, Hard Rock Café International, announced the launch of its unified global loyalty program, Hard Rock Rewards. The press release breezily described it as “a unified guest affinity program developed to recognize and reward Hard Rock's dedicated fans with exclusive privileges...” Hard Rock Rewards has two tiers: a free program and a VIP program, which has a $24.95 annual membership fee and offers “exclusive perks and benefits fit for a rock-star.” To sign up, customers can enroll online or through dedicated in-store kiosks.

This simplicity belies what was actually an incredibly complicated process for Hard Rock International—one that included extensive customer research, buy-in from numerous internal managers across various Hard Rock departments, a technology update, respect for the interests of existing loyalty program members, and adherence to privacy laws across countries.

The program might have officially launched in 2013, but the journey began two and a half years ago, and it was rife with challenges—both internal and external.

Loyalty is frequency

Hard Rock Café, like its peers in the casual dining space, exists in an awkward time. The emergence of “polished casual” chains, such as Yard House and BJ's, have siphoned off some middle- and upper-income diners, says Darren Tristano, EVP at Technomic, a consultation and research firm dedicated to the food industry. Conversely, lower-income consumers are shifting down to “fast casual” restaurants, such as Chipotle or Five Guys.

That leaves casual dining restaurants like Hard Rock Café—which Tristano defines as restaurants where the average entrée ranges from $12 to $25—in a bit of a lurch. “They're getting hit on both ends and it's hard to steal business from other parts of the industry,” Tristano says. “Even brands like Red Lobster have been struggling of late.”

In August 2012 Darden Concepts Inc.—the parent company of Red Lobster and Olive Garden—finalized its purchase of Yard House USA for $585 million. It's a play, Tristano says, to bring in new dining concepts to keep its upper-income customer segment intact. But Darden is still struggling; in February it announced an expected 4.5% Q3 revenue loss.

It's unclear how the privately held Hard Rock brands are currently faring (they were purchased in 2007 for $965 million by the Seminole Tribe of Florida). What is clear, however, is that loyalty in the restaurant business is as crucial for success as it is difficult to cultivate.

A trends survey from the October 2012 National Restaurant Association's Restaurant Industry Forecast report found that repeat customers comprise 64% of casual dining sales. Although this number is higher than it was the year previous, restaurant owners maintain that customer loyalty is increasingly difficult to instill.

This might be because restaurant loyalty programs are growing in popularity—hence, there's more competition. Mark Johnson, president and CEO of loyalty marketer association Loyalty 360, notes that while there have been “fits and starts” in restaurant loyalty programs in the past, they hadn't been targeted to specific audiences. A 2013 Technomic report on loyalty in the food service industry found that, among the top 200 restaurant chains (which weren't exclusively casual dining establishments), there were few loyalty programs in place. “Finances are a major prohibitor,” Tristano says, “because you have to tie in your costs across the entire system.” Moreover, owners and managers of restaurants often aren't savvy marketers and are more concerned with operational efficiencies like speed of service.

But Johnson sees more casual dining restaurants offering loyalty programs. Technology today, he says, makes it easier: “When you look at the simplicity of reporting and the granularity of analytics, they make [data] more actionable. If you see this segmentation, you can act on this behavior. [So,] there's a transition now to a consumer-based marketing approach rather than a mass-market approach.”

Although most individuals don't patronize casual dining restaurants as often as they do Starbucks or Dunkin' Donuts (both of which have mature loyalty programs), there's still an element of repeat business that some casual dining establishments aim to capitalize on.

“When you get down to loyalty in the restaurant industry, it doesn't mean loyalty, it means frequency,” Tristano says. “You won't eat at a restaurant three meals a day, seven days a week. They're trying to find frequency programs that incent and reward patrons for coming back and being regular customers.”

In this respect, Hard Rock International finds itself in an advantageous position. Across its various properties including casinos, restaurants, hotels, stores, and sponsored concerts and performances, the chain has numerous low-cost, high-value benefits to provide customers that go well beyond a 10% meal discount.

Loyal by design

The development of Hard Rock Rewards began with an ear to the ground. With the assistance of Brierley+Partners, a firm that designs and manages loyalty programs, Hard Rock began an extensive research and survey campaign, comprising of tens of thousands of customers across multiple nationalities and languages. The goal was to ensure that loyalty value propositions resonated—and that the rewards Hard Rock wanted to offer would achieve the desired customer behavior: more visits to Hard Rock properties and purchases of Hard Rock products.

“What's been a success and what will continue to be a success is we listened to what customers want from us,” says Kim Matlock, Hard Rock International's senior director of digital marketing and CRM. The results of the research left Hard Rock with three key takeaways, Matlock says: customers wanted consistent communication, a points-based approach, and rewards that provided unique experiences and not just the occasional discount.

Those latter two points, says Amy Barnett, SVP of strategy at Brierley+Partners, indicate a changing trend in loyalty. “The days of real, structured loyalty, where you do one behavior and earn one reward, have [changed] quite a bit,” she says. “Those earned rewards, based on a specific behavior, are a key component for driving sales and revenue.”

The All Access program didn't have a tremendous library of rewards, Barnett notes. “Research helped us zone in on the highest perceived value at a very profitable cost,” she says, referring to the new program. “So rather than discounts, we could give experiential rewards.” These experiential benefits include invitations to grand opening parties or backstage meet and greets with musicians.

Another area that needed to be revamped was Hard Rock's communication strategy, primarily its approach to email. The company began systemizing its delivery to send emails at the beginning of each month, and on special occasions relevant to the customer, where before it had been haphazard. “Emails are now personalized,” Matlock says. “For birthday messages, the click-throughs are extraordinarily high and the open rates are fantastic: 60 to 70%.”